Question

You want to start saving money for your retirement. You want to retire in 35 years and think you will need to accumulate $1,500,000 to maintain your desired lifestyle after you retire. If you are confident you will be generating 6% annual rate of return, how much do you have to save each month?

Group of answer choices

$1,121.73

$712.74

$1,052.85

$8,552.85

Answer 1

Future value to accumulate in 35 years = $1500,000

Calculating the amount need to save each month using FV of ordinary annuity formula:-

Where, C= Periodic Payments

r = Periodic Interest rate = 6%/12 = 0.5%

n= no of periods = 35 years*12 = 420

C = $1052.85

So, the amount have to save each month is $1052.85

Option 3